Bernanke on the Federal Reserve: “We Are Faking It.”


Bernanke on July 10 delivered a classic Bernanke speech: 44 footnotes.

Title: “The First 100 Years of the Federal Reserve: The Policy Record, Lessons Learned, and Prospects for the Future.” Setting: a conference sponsored by the National Bureau of Economic Research. The NBER is the #1 academic organization devoted to studying America’s business cycles. It designates when recessions begin and end.

Here is where he summarizes his life’s work. Here is where he justifies his actions in front of his peers. We should pay attention.

He called the FED “The Great Experiment.”

In the words of one of the authors of the Federal Reserve Act, Robert Latham Owen, the Federal Reserve was established to “provide a means by which periodic panics which shake the American Republic and do it enormous injury shall be stopped.”1 In short, the original goal of the Great Experiment that was the founding of the Fed was the preservation of financial stability.

Clearly, this goal failed. Bernanke and the apologists cannot escape this fact: the Great Depression proved this goal was a pipe dream. So have all recessions.

The new institution was intended to relieve such strains by providing an “elastic” currency–that is, by providing liquidity as needed to individual member banks through the discount window; commercial banks, in turn, would then be able to accommodate their customers.


The FED operated under a gold standard. It fought this standard.

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